Agenda item

Purpose of the Report

(a)         To present to the Executive the provisional 2020/21 financial outturn position on the Council’s revenue and capital budgets, including:

·         General Fund;

·         Housing Revenue Account;

·         Housing Repairs Service; and

·         Capital Programmes.

(b)         To provide the Executive with a summary of the actual income and expenditure compared to the revised budget and how any surpluses have been allocated to reserves.

Decision

(1)         That the provisional 2020/21 financial outturn for the General Fund, Housing Revenue Account, Housing Repairs Service and Capital Programmes (as set out in sections 3 – 7 of the report), and in particular the reasons for any variances, be noted.

(2)         That the transfers to General Fund earmarked reserves (as detailed in paragraph 3.12) and Housing Revenue Account earmarked reserves (as detailed in paragraph 4.6 of the report) be approved.

(3)         That the General Fund carry forward requests (as detailed in paragraph 3.14 of the report), which had not been requested at Quarter 3, be approved.

(4)         That the financial changes to both the General Investment Programme and the Housing Investment Programme (paragraphs 7.3 and 7.9 of the report), which were above the 10% budget variance limit, as delegated to the Chief Finance Officer, be approved.

Alternative Options Considered and Rejected

None. 

Reasons for Decision

Covid-19 had taken its toll on the financial resilience of the Council during 2020/21 as income streams had declined, and there were additional costs in continuing services during the pandemic.  These impacts were not limited to the 2020/21 financial year, but would affect the period of the medium term financial strategy.  In terms of the financial year 2020/21, the key challenges were the costs and demands arising from the pandemic. This had resulted in significant shortfalls on the General Fund prior to the support from the Government.  It was highlighted that for the General Fund the financial performance quarterly monitoring report for the third quarter had predicted an underspend against the revised budget of £122,723.  The provisional outturn for 2020/21 was now indicating an overall budget underspend of £148,381 (including proposed transfers to/from earmarked reserves and carry forward requests).  The financial impact of Covid-19 on the Council equated to circa £7 million. A breakdown of key variances to the General Fund was detailed at paragraph 3.3 of the report.

In advance of any financial support from the Government, the Council had implemented measures to reduce certain areas of expenditure, which ensured that the Council delivered its critical services and its financial balances would provide resilience for future years.

In response to requests from local authorities, the Government allocated a total of £4.6 billion of grant funding to support local authorities for expenditure pressures. The Government had also introduced an income compensation scheme for approximately 75p in every £1 of lost sales, fees and charges income. In additional a local tax income guarantee scheme compensated local authorities for 75% of irrecoverable losses in Council Tax and Business Rates. To date the Council had received funding support of £1.877 million for Covid-19 pressures, with an estimated £2.989 million through the income compensation scheme; and a further £0.519 million through the local tax income guarantee scheme.

No additional financial support had been provided to the Housing Revenue Account.

Despite the Government's support, the General Fund would still have been unable to maintain a balanced budget position without having taken the measures implemented during quarter one. The detailed financial position was set out in sections 3 - 7 of the report.

Although both the General Fund and Housing Revenue Account had maintained balanced budget positions in 2020/21, this did not mean that the financial issues for the Council had been resolved, but only that the in-year budget challenges had been addressed. It was also commented that the pandemic had prevented certain housing maintenance from taking place and therefore there was a backlog of repairs, which would impact on the budget position of the account in future years.  Beyond 2020/21 the Council would face reductions in resources and increased service costs from the impacts of Covid-19.  This would require ongoing reductions in the net cost base to align with significantly reduced resources.  The Council’s medium term financial strategy, approved by the Council in March 2021, had detailed the financial challenge facing the Council.

The Executive reiterated the financial challenges faced by the Council, which were owing to the reductions in the local government finance settlement over recent years; and the loss of income and the increased expenditure during the pandemic.  It was highlighted that the Council’s financial position would have been worse, if decisions had not been made to reduce expenditure in certain areas.